Citigroup, Wells Fargo, and other financial institutions are kicking off a new digital dollar pilot with the Federal Reserve Bank of New York, Reuters reports.
Called the regulated liability network, the project will be conducted with the help of simulated data.
The purpose of the pilot, which will last for a total of 12 weeks, is to determine how digital dollar tokens could increase the speed of payments.
In mid-September, the U.S. Treasury Department recommended exploring the creation of a digital dollar.
The Biden administration is convinced that the digital dollar would help the U.S. to remain a leader in the global financial system.
In a white paper published in June, U.S. Rep. Jim Himes (D-Conn.) argue that the creation of the digital dollar would help to reinforce the greenback's status as the world reserve currency.
For now, the U.S. appears to be in the initial stage of working on a central bank digital currency (CBDC). It remains unclear what its architecture would potentially look like.
Last year, Federal Reserve Chair Jerome Powell said that he was "undecided" on the benefits of CBDCs.
Some other countries, such as Sweden, are already considering issuing their CBDCs.